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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era -- Ignore unavailable to you. Want to Upgrade?

To: porcupine --''''> who wrote (975)	11/11/1998 9:29:00 PM
From: porcupine --''''>	Respond to of 1722

IBM plans largest PC hard disk NEW YORK, Nov 11 (Reuters) - International Business Machines Corp. will unveil Wednesday the largest hard drive available for personal computers, with roughly three times the capacity of typical storage disks now shipping in consumer PCs. The company said it will offer a 25 gigabyte, or billion byte, drive aimed at home or PC hobbyists with an insatiable demand for storing data. IBM will also offer a 22 gigabyte drive with faster response times aimed at the corporate market. The Armonk, N.Y. company said it is shipping limited numbers of the drives to PC makers for use in models that will be available in time for Christmas. Among PC makers taking the drives are Gateway 2000 Inc. , Hewlett-Packard Co. and Micron Electronics Inc. . IBM will also put the drives in its own machines. The drives will be available to distributors and resellers in the first quarter of 1999. IBM introduced the first disk drive ever in 1956. It had a capacity of 5 mega or million bytes and was the size of two large refrigerators. The new drive has 5,000 times that capacity. The 25 gigabyte drive, known as the Deskstar 25GP, operates at 5,400 revolutions per minute and is designed for the consumer PC user. The 22 gigabyte, Deskstar 22GXP drive operates at a faster 7,200 revolutions per minute and is targeted at video editors, engineers and scientists. ((Eric Auchard, New York News Desk 212 859-1840))

To: porcupine --''''> who wrote (975)	11/11/1998 10:27:00 PM
From: Freedom Fighter	Respond to of 1722

Reynolds, >>>Is this based on actual reported earnings or the operating variety? I haven't looked at GM in a while.<<< >GM will easily net $7 or $8 per share over the coming 12 months, no matter how calculated. With the share price still under $70, that puts the earnings yield over 10%. As noted above, GM borrows money for less than 6%.< That would seem to be fine in light of the cash cushion. >>As for business risk, can you name any members of Congress that would not vote to bail out GM?<< I don't see this as a comforting fact even if true. If it gets to that point you have already made a bad investment. I think neither of us suspect that it will happen anyway. >>>There are many companies out there right now that are buying in shares with cash and debt at significantly above TANGIBLE book value. They are thus shrinking the balance sheet and making themselves look more profitable (higher ROE and more rapid growth rate in EPS) when in reality all they are doing is leveraging the company and potentially increasing risk.<<< >Share buybacks reduce equity regardless of cash and debt levels relative to tangible book value -- as would any distribution of cash to shareholders.< What I was talking about is buying back shares with cash in excess of the free cash produced by operations. If done at above tangible book value, a company can have positive EPS for the year, pay no dividends, and book value will be reduced at year end. With even the same net income the next year, EPS will be higher and so will ROE. The debt level to tangible book value is increased. If you only buy back shares with free cash flow from operations, book value per share increases even if every dollar of free cash is used. The first is unsustainable and leverage increasing (a sort of financial engineering), the second is not. >>For most of the 1990's, corporate debt grew at a decreasing rate. As can be seen from the very first posting on this thread, for much of the decade debt on the DJIA grew at an average of 3.6% annually, while revenues (a less ambiguous figure than book value) grew at 5% annually.<< I am suspicious of revenues because statistically corporate America is getting its highest percentage of the pie in many decades, there are virtually no personal savings, and household credit levels have been growing faster than incomes for a very long time. All of this translates into higher revenues for business. But some of this is mathematically unsustainable and at least some of it is at risk long term. The tangible book value figures are also suspect. I agree with you on that. But I still suspect that the debt levels may be growing faster than the tangible book values on a broader basis. At least including the last year or so. One would think that even if the tangible book numbers are understating the asset values, the recent growth of them should be pretty accurate since it would represent only recent investments and retained earnings. The other reason that corporate debt growth is slowing is that nominal GDP growth is slowing because of lower inflation in the 90's and a very subdued real growth rate in the early 90's. That does not necessarily mean we are deleveraging relative to tangible assets. >>However, it is being financed at decreasing rates of interest.<< This is certainly a plus for everyone. I have one problem with it. If interest rates fall in half, I can carry twice as much debt. But am I really in the same financial condition if I double my debt when viewed from a risk point of view?